Renewable Fuel Standard (RFS) Program

The national RFS Program was developed to increase the volume of renewable fuel that is blended into transportation fuels. As required by the Energy Policy Act of 2005, the U.S. Environmental Protection Agency (EPA) finalized RFS Program regulations, effective September 1, 2007. The Energy Independence and Security Act of 2007 (EISA) increased and expanded this standard. By 2022, 36 billion gallons of renewable fuel must be blended into domestic transportation fuels each year. A certain percentage of this renewable fuel must be advanced biofuel, which includes fuels derived from approved renewable biomass, excluding corn starch-based ethanol. Other advanced biofuels may include sugarcane-based fuels, renewable diesel co-processed with petroleum, and other biofuels that may exist in the future. All advanced biofuels must achieve a minimum of a 50% greenhouse gas (GHG) emissions reduction compared to baseline petroleum emissions. Nested within advanced biofuels are two sub-categories: cellulosic biofuel and biomass-based diesel, both of which have their own percentage requirements. Cellulosic biofuel is defined as any renewable fuel derived from cellulose, hemicellulose, or lignin that achieves a 60% GHG emissions reduction. Biomass-based diesel is defined as a renewable transportation fuel, transportation fuel additive, heating oil, or jet fuel, such as biodiesel or non-ester renewable diesel, and achieves a 50% GHG emissions reduction. If intended for use in a motor vehicle, the fuel must also be registered with EPA as a motor vehicle fuel or fuel additive.

Each year, EPA determines the annual percentage standards by dividing the annual amount of renewable fuel (gallons) required by EISA for each renewable fuel pathway by the amount of highway and nonroad gasoline and petroleum diesel estimated to be supplied that year. These percentages are then applied to obligated parties' actual fuel sales to determine their Renewable Volume Obligation (RVO). Any party that produces gasoline for use in the United States, including refiners, importers, and blenders (other than oxygenate blenders), is considered an obligated party under the RFS Program. Parties that do not produce, import, or market fuels within the 48 contiguous states are exempt from the renewable fuel tracking program.

To facilitate and track compliance with the RFS, a producer or importer of renewable fuel must generate Renewable Identification Numbers (RINs) to represent renewable fuels produced or imported by the entity on or after September 1, 2007, assigned by gallon or batch. Assigned RINs are transferred when ownership of a batch of fuel occurs, but not when fuel only changes custody. A trading program is in place to allow obligated parties to comply with their annual RVO requirements through the purchase of RINs. Obligated parties must register with EPA in order to participate in the trading program. For each calendar year, an obligated party must demonstrate that it has sufficient RINs to cover its RVO. RINs may only be used for compliance purposes in the calendar year they are generated or the following year. Obligated parties must report their ownership of RINs to EPA's Office of Transportation and Air Quality on a quarterly and annual basis.